Stablecoin stashes and cash reserves in question amid crypto exodus


Cryptocurrency investors and traders withdrew $7.7 billion from stablecoin Tether (USDT), causing its market cap to fall 7.8% to $76 billion over the past seven days.

The amount withdrawn from the top stablecoin is nearly double the $4.1 billion it held in cash reserves at the end of 2021, according to Tether’s most recent reserves report from December 2021.

To maintain Tether’s peg to the US dollar, the entity behind the token supports USDT with assets such as cash, bonds, and treasury bills, with the purpose being that each token is backed by at least $1 worth of assets.

According to the most recent reserves report, the company had at least $78.6 billion in total assets, of which roughly $4 billion, or 5%, was cash.

However, the company appears to be able to maintain its cash reserves despite the “bank run” scenario caused by the collapse of the algorithmic stablecoin TerraUSD (UST), which has seen investors divest not only from stablecoins, but fled the entire crypto market.

A separate transparency report, updated daily, shows that 6.36% of Tether’s assets are currently held in cash, which would amount to about $4.8 billion if Tether’s reserves closely matched the USDT market cap.

On May 12, a market panic saw USDT/USD trade below $0.99 on major exchanges, prompting Tether to make a statement at the time that it would honor all redemptions up to $1.

On the same day, Tether’s Chief Technology Officer Paolo Ardoino said in a Twitter space Chat that the majority of the company’s reserves are invested in US Treasuries and that it has reduced its exposure to commercial paper over the past six months.

Related: Untethered: Here’s everything you need to know about TerraUSD, Tether, and other stablecoins

Tether has been scrutinized for its secrecy surrounding the assets in its reserve and only released its first reserve breakdown in May 2021. The published reports are still vague as to the exact assets in which the company invests.

This ambiguity, coupled with the recent short-lived de-pegging, prompted some investors to swap their tether for another popular US dollar stablecoin, USD Coin (USDC), assuming USDC was audited and already fully through Cash and US Treasuries are covered.

A May 13 blog post by Circle’s Chief Financial Officer Jeremy Fox-Geen, written in response to the stablecoin fallout, reconfirmed that USD Coin for the $50.6 billion USDC in circulation was fully funded by cash and US Treasuries was covered.

Data from CoinGecko further shows that investors are finding a safe haven in USDC, a 6.3% jump in USDC market cap took place between May 3rd and May 17th, generating $3.1 billion in inflows. equivalent to dollars at that time. Stablecoin stashes and cash reserves in question amid crypto exodus

Fry Electronics Team

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